The Government Admits That Energy Subsidy Does Not Reduce Poverty And People's Inequality

Head of the BKF of the Ministry of Finance Febrio Kacaribu (Photo: Capture Youtube Screenshot of Commission XI DPR)

JAKARTA - The government through the Ministry of Finance (Kemenkeu) admits that the provision of energy subsidies, such as diesel and LPG gas, is not effective enough to reduce the poverty and inequality levels in society.

This was revealed by the Head of the Fiscal Policy Agency (BKF) of the Ministry of Finance Febrio Kacaribu when attending a working meeting with Commission XI of the DPR.

In his explanation, solar subsidies are regressive with the distribution of benefits of only about 26 percent. Likewise, LPG gas which is also regressive with 19 percent benefit.

"If we look at various programs, energy subsidies for diesel and LPG do not support our efforts to reduce poverty and inequality levels," he said during the discussion of the 2023 State Budget Bill at the Senayan Parliament Complex, Jakarta on Monday, September 12.

Therefore, Febrio emphasized that the government and the DPR must jointly formulate policies that are more targeted for the community.

"This subsidy needs to be evaluated continuously so that the transfer of value given to the people who are entitled, especially for the community in deciles 1,2, 3 and 4," he said.

Febrio added that there are at least how many main challenges need to be found solutions. First, the high commodity price causes the value of subsidies to be large. Second, diesel and LPG are still distributed openly.

Three, the validation of subsidy recipient data is incomplete, and the four budget needs are considered to be increasing along with efforts to support new and renewable energy (EBT).

"For this reason, the government encourages subsidy reforms to be right on target so that they are given directly to beneficiaries by using digital data applications," he said.

For information, in the 2023 State Budget Bill, the government will offer a subsidy budget and compensation for next year of IDR 336 trillion.

Meanwhile, in the 2022 State Budget Law, the value of subsidies and compensation is designed at around Rp. 152 trillion. This figure was then increased to Rp502 trillion in line with the increase in world energy commodity prices.